Xi's Agenda for France Visit - New Series on State of the Economy - Zhong Caiwen's Pushback on Overcapacity - What Does China Want from Europe?
Here are the key reports and articles that I found noteworthy from the People's Daily’s edition on Monday, May 06, 2024.
Page 1: The lead story today is about Xi Jinping’s visit to France. Xi arrived in Paris yesterday. Xi was received by French Prime Minister Gabriel Attal at Paris Orly airport. Xi said:
“As important representatives of Eastern and Western civilizations, China and France have a long history of mutual appreciation and admiration. Sixty years ago, China and France broke through the Cold War barriers and established diplomatic relations. Over the past 60 years, China-France relations have always been at the forefront of China’s relations with Western countries. The development of China-France relations not only brings benefits to the two peoples, but also injects stability and positive energy into the turbulent world. During the visit, I will have an in-depth exchange of views with President Macron on the development of China-France and China-EU relations under the new situation, as well as current major international and regional issues. I hope that through this visit, we will be able to consolidate the traditional friendship between the two countries, enhance mutual political trust, build strategic consensus, deepen exchanges and cooperation in various fields, use the torch of history to illuminate the way forward, create a better future for China-France relations and make new contributions to world peace, stability and development.” 作为东西方文明的重要代表，中国和法国长期以来相互欣赏、相互吸引。60年前，中法两国突破冷战藩篱，建立大使级外交关系。60年来，中法关系始终走在中国同西方国家关系前列。中法关系发展不仅给两国人民带来福祉，也为动荡不安的世界注入了稳定性和正能量。访问期间，我将同马克龙总统就新形势下中法、中欧关系发展，以及当前重大国际和地区问题深入交换意见。我希望通过这次访问，巩固两国传统友谊、增进政治互信、凝聚战略共识、深化各领域交流合作，用历史的火炬照亮前行的路，创造中法关系更加美好未来，为世界和平、稳定、发展作出新的贡献.
Peng Liyuan, Cai Qi and Wang Yi are mentioned as accompanying Xi during the visit.
Ahead of his arrival, a signed article was published in Le Figaro. Xinhua has the full English version of the article. It says:
“China will work with France to carry forward the spirit that guided the establishment of their diplomatic ties, build on past achievements and open new vistas for China-France relations. This year marks the 60th anniversary of China-France relations. Six decades ago, General Charles de Gaulle, with a strategic vision based on the trend of the time, resolved to establish diplomatic relations with New China. It wasn't easy to make this independent decision at the height of the Cold War, but it has proven to be right and foresighted. With the establishment of China-France relations, a bridge of communication between the East and West was built, and the international relations were able to evolve in the direction of dialogue and cooperation. In these six decades, China-France relations have stayed abreast of the times. Our two countries took the lead in establishing a comprehensive strategic partnership and launching institutional strategic dialogue in China's relations with Western countries. We spearheaded cooperation in aviation and nuclear energy and on third-party markets. We were among the first to mutually open cultural centers and start cultural year activities, providing guidance for mutual learning between civilizations. China-France cooperation contributed to the conclusion of the Paris Agreement on climate change and the Kunming-Montreal Global Biodiversity Framework, boosting strongly the implementation of the global climate agenda. History is our best teacher. We live in a world that is far from being tranquil and is once again facing a multitude of risks. China is ready to work with France in the spirit that guided the establishment of our diplomatic ties to forge a stronger comprehensive strategic partnership between our two countries and make new contributions to stronger cooperation of the global community.” (Comment: Basically, this is a reiteration of the argument that France must act with strategic autonomy vis-a-vis the US.)
China will open even wider to the world and deepen cooperation with France and other countries…One thing that has made China's development possible is our firm commitment to opening up. We welcome more quality French farm products and cosmetics to the Chinese market to meet the ever-growing needs of the Chinese people for a better life. We welcome investment by companies from France and other countries to China. To this end, we have fully opened up China's manufacturing sector, and will move faster to expand market access to telecom, medical and other services. We also have a 15-day visa-exemption policy for visitors from many countries including France, and we have taken further measures to facilitate travel and payment by foreigners in China. While opening up itself, China also encourages Chinese companies to go global. France is advancing re-industrialization based on green innovation, whereas China is accelerating the development of new quality productive forces. Our two countries can deepen cooperation on innovation and jointly promote green development. Some Chinese companies have set up battery plants in France. The Chinese government supports more Chinese companies in investing in France. And we hope that France will ensure that they operate in a fair and equitable business environment. (Comment: This is the argument against de-risking.)
“China will strengthen communication and coordination with France to uphold world peace and stability…” Xi talks about the Five Principles of Peaceful Coexistence and GDI, GSI and GCI. It is interesting that he says this: “Over the past 70-plus years since its founding, New China never provoked a war or occupied an inch of foreign land. China is the only country around the world that includes in its Constitution the commitment to the path of peaceful development, and China is the only country among the major nuclear-weapon states that is committed to no-first-use of nuclear weapons.” And then talks about the Ukraine war. “China understands the repercussions of the Ukraine crisis on the people of Europe. China did not start the Ukraine crisis, nor is it a party to or a participant in it. Nonetheless, China has been playing a constructive role in striving for peaceful settlement of the crisis. I have made many appeals, among others, observing the purposes and principles of the UN Charter, respecting sovereignty and territorial integrity of all countries, and addressing the legitimate security concerns of all sides. I have stressed that nuclear weapons must not be used, and a nuclear war must not be fought. China has delivered to Ukraine many shipments of humanitarian aids, and sent its special representative many times to mediate among the countries concerned. The longer the Ukraine crisis drags on, the greater harm it will do to Europe and the world. China hopes that peace and stability will return to Europe at an early date. We stand ready to work with France and the whole international community to find a reasonable way out of the crisis.” (Comment: One could read this as very smart structuring that is critical of Russia for having violated Ukraine’s sovereignty, without actually criticising Russia. He also does not call the war in Ukraine a war. It’s still a crisis.) Xi also writes about China and France cooperating on the conflict in the Middle East. He says “The fundamental solution lies in the establishment of an independent State of Palestine.”
In perhaps the least transparent attempt to reiterate the point about China wanting France to not work with the US on issues related to Beijing’s interests, Xi ends by calling in the philosophical guns.
“Confucius observed that ‘a man of true moral integrity is one who is both friendly but independent, and who does not compromise his principles, and who is independent without any bias or taking sides. How unflinchingly firm he is in his strength!’ French writer Romain Rolland said that “it is so much easier to allow oneself to be guided than it is to think for oneself. This abdication is the kernel of the mischief’.”
While we are on the visit to France, let me reproduce this bit from The Economist’s excellent interview with President Macron.
“The Economist: We want to talk about China. Xi Jinping will be in Paris for a state visit next week. It seems increasingly clear that China is trying to use exports to compensate for its economic slowdown. The United States is closing its markets. What will your message be about how open the European market is to China?
Emmanuel Macron: Here too, we have to be very pragmatic and look at this issue in the light of our strategic interests. And sometimes we have given in to too much dogmatism or fragmented interests. First of all, and this is one of my main objectives in welcoming President Xi Jinping, we must do everything we can to engage China on major global issues, and discuss economic relations that are based on reciprocity.
China is crucial when it comes to major questions about the planet, starting with climate and biodiversity. I haven’t forgotten that if we succeeded in reaching the Paris climate agreements nearly ten years ago, it was because of remarkable diplomatic work and a Sino-American agreement a few months earlier. That was the precondition for everything. There will be no progress on climate and biodiversity if there is no agreement with the Chinese on these issues. So the role of Europeans is to do everything we can to facilitate a consensus on these major climate and biodiversity issues. Secondly, it’s in our interest to ensure that China has a say in the stability of the international order. It’s not in China’s interest today to have a Russia that destabilises the international order, an Iran that could acquire nuclear weapons and a Middle East that is plunged into chaos. So we need to work with China to build peace. I hope that China will support an Olympic truce and be committed to the fight against nuclear proliferation in order specifically to tighten the framework vis-à-vis certain powers.
Finally, there is the economic question. We in the West have not always been clear with the Chinese. Firstly, because European interests have not always been clear. Until recently, China was seen as a big export market. France de-industrialised 20 years ago. We didn’t benefit much from it, but we saw China as a good export market for the European car industry, especially the German car industry. I respect that. It created a lot of jobs, not just in Germany, but all over Europe. Does this still hold? The answer is no. Because today, China has an overcapacity of vehicles and exports them on a massive scale, particularly to Europe. Does this mean that some European manufacturers have an interest in seeing this situation continue? The answer is yes. Because they receive subsidies in China and can produce and sell in China and export their excess capacity to the Chinese market. Is this good for Europeans? The answer is no. So when it comes to trade, I’m in favour of looking at things in the face. China is in a situation of excess capacity, so China is no longer necessarily, or at least not massively, a major export market for Europe. It’s a large market that itself exports. So that’s the first thing that has changed.
At the same time, the multilateral context has changed, which is more because of the Americans. For 30 years we’ve been saying that we’re going to do everything we can to bring China back into line with international rules. We brought China into the WTO, and then we realised that the rules were not being respected, that dispute settlements were not effective, that the WTO was not effective enough, and that, as a result, we were not sufficiently protected. And then, in the end, everyone gave up asking. I have pushed this agenda of modernising the World Trade Organisation several times. Everyone underestimated the value of modernisation. And the same goes for the United States. The Inflation Reduction Act, which is a conceptual revolution in economic terms, was a key issue during my state visit to the United States in 2022. The Americans have stopped trying to get the Chinese to conform to the rules of international trade. They have taken their own action. And we Europeans haven’t wanted to see this. That’s a huge mistake. When you have the number one, the number two, who decide in all conscience to subsidise critical sectors that they consider essential for them, who are prepared to put public money into attracting capacity, you can’t carry on as if this isn’t happening. The WTO today is in deep crisis. It’s up to us to reinvent it for the 21st century.
That’s why I called for this awakening. And that was one of the subjects of my speech at the Sorbonne: we regulate too much, we don’t invest enough, we don’t protect enough. That’s not a dirty word. I’m not trying to say that I’m against trade deals. We are ten times more open than the Americans or the Chinese. The consequence is that today we must behave respectfully towards China in terms of trade, but in a way that defends our interests, is reciprocal and promotes national security. Very clearly, on electric vehicles, photovoltaics and wind power, I defend the investigations that have been opened by the European Commission. Because we simply have very different rules for our products, and there are products that are much more heavily subsidised but, above all, do not have the same tariffs. We cannot sustainably have a Europe with rules that limit subsidies to these producers, who are taxed at 15% when their electric vehicle enters the Chinese market and who, when the Chinese vehicle arrives on the European market after receiving massive aid, are taxed at 10%. Reciprocity: that’s the first point.
We mustn’t forget national security issues. There are many sectors in which China demands that producers be Chinese, because they are too sensitive. Well, we Europeans have to be able to do the same thing and say that there are sectors that are a matter of European national security. This is the new economic paradigm that I explained at the Sorbonne, which is basically simplification, massive decarbonised industrialisation, much faster investment, a policy of R&D, innovation and productivity, and protection through trade policy, which must have mirror clauses and measures. These five principles are fundamental if we want prosperity in Europe. And this is also what I want to engage China on. I draw these five principles not just from a profound change in China’s economic situation, but also from a change in American trade and economic policy.”
Back to PD, there’s a long report on the page that offers a round-up of Xi’s diplomatic engagements since March. One part of the narrative in the report is to push back against decoupling and de-risking and the idea that we have hit Peak China.
“In the first quarter of this year, 12,000 new foreign-invested enterprises were established in China, a year-on-year increase of 20.7%; the actual FDI in China stood at 301.67 billion yuan ($42.46 billion), an increase of 41.7% compared with the fourth quarter of 2023.” 今年一季度，中国新设外商投资企业1.2万家，同比增长20.7%；实际使用外资金额3016.7亿元人民币，较2023年第四季度环比增长41.7%.
Finally, there’s a report talking about the sound beginning to the year for the Chinese economy 经济平稳起步持续回升向好. This is part of a new series that will be talking up the economy. The article plays to the idea of stability and making progress.
It says that as per Q1 data, the foundation of stability has been further consolidated.
In Q1, the added value of industry increased by 6% year-on-year, a significant rebound from the same period last year and the fourth quarter of last year; the added value of the service sector increased by 5% year-on-year, maintaining rapid growth. Looking at demand, the ‘troika’ of drivers are pulling together more cohesively. In the first quarter, fixed asset investment increased by 4.5% year-on-year, 1.5 percentage points faster than last year; total retail sales of consumer goods increased by 4.7% year-on-year; exports increased by 4.9%, and the growth rate was 4.3 percentage points higher than last year. Looking at people’s livelihood, employment and prices are basically stable. In Q1, the average urban surveyed unemployment rate was 5.2%, down 0.3 percentage points from the same period last year; the national consumer price index remained unchanged year-on-year; the per capita disposable income of national residents actually increased by 6.2%, growing faster than GDP growth rate. Looking at expectations, market confidence is steadily recovering. In Q1, the total profits of industrial enterprises above designated size increased by 4.3% year-on-year, and corporate profits recovered quickly. In April, China's manufacturing PMI was 50.4%, indicating expansion for the second straight month.” “稳”的基础更加巩固。看供给，工业、服务业发展态势良好。一季度，工业增加值同比增长6%，比去年同期和去年第四季度有明显回升；服务业增加值同比增长5%，保持较快增长。看需求，“三驾马车”拉动更加协调。一季度，固定资产投资同比增长4.5%，增速比去年全年加快1.5个百分点；社会消费品零售总额同比增长4.7%；出口额增长4.9%，增幅比去年全年提高4.3个百分点。看民生，就业物价基本稳定。一季度，全国城镇调查失业率平均值为5.2%，比上年同期下降0.3个百分点；全国居民消费价格指数同比持平；全国居民人均可支配收入实际增长6.2%，继续快于经济增速。看预期，市场信心稳步恢复。一季度，规模以上工业企业利润总额同比增长4.3%，企业效益较快恢复。4月份，中国制造业采购经理指数为50.4%，连续两个月位于扩张区间.
Then the article talks about progress. In this regard, we get to new quality productive forces rather quickly.
“All regions and departments are seizing opportunities, striving to be the first, and developing new quality productive forces in accordance with local conditions. Beijing is actively cultivating future industry clusters, such as robotics and commercial aerospace; Shanghai is accelerating the layout of new tracks, such as large models and humanoid robots; and Shenzhen is increasing investment in basic research and deeply integrating the innovation chain, industrial chain, capital chain and talent chain.” 循“新”出发，向“新”而行。各地区各部门抢抓机遇、奋勇争先，因地制宜发展新质生产力。北京积极培育机器人、商业航天等未来产业集聚区，上海加速布局大模型、人形机器人等新赛道，深圳加强基础研究投入，深度融合创新链产业链资金链人才链.
Some of the sectors mentioned are solar energy, NEVs, high-speed trains, etc. It says: “In the first quarter, the added value of high-tech manufacturing above designated size increased by 7.5% year-on-year, and investment in high-tech industries increased by 11.4% year-on-year. The construction of new infrastructure such as 5G base stations, big data computing, and optical fiber communication accelerated, strengthening the innovation ‘primary driving force’ even further.” 一季度，规模以上高技术制造业增加值同比增长7.5%，高技术产业投资同比增长11.4%，5G基站、东数西算、光纤通信等新型基础设施建设加快落地，创新“第一动力”更强劲.
The article also quotes Xi as warning: “developing new quality productive forces does not mean neglecting or abandoning traditional industries. It is necessary to prevent rushing in without consideration and speculative bubble formation, and avoid the tendency to adopt a single fixed model.” 习近平总书记强调：“发展新质生产力不是忽视、放弃传统产业，要防止一哄而上、泡沫化，也不要搞一种模式.”
It adds that “at present, the integrated application of industrial Internet has expanded to 49 major categories of the national economy, forming more than 200 industrial Internet demonstration application benchmarks, and the number of ‘5G + industrial Internet’ projects exceeds 10,000.” 目前，工业互联网融合应用已拓展至49个国民经济大类，形成200余个工业互联网示范应用标杆，“5G+工业互联网”项目数超过1万个. Another key aspect mentioned in this context is to pursue green development.
The second section of the article talks about coordinating supply and demand and urban and rural development. In this context, the article mentions the work done with regard to the Xiong'an–Xinzhou high-speed railway and the Beijing–Tangshan intercity railway. It also says that “the number of major projects jointly constructed by Sichuan and Chongqing has been expanded to 300, with annual planned investment exceeding 400 billion yuan.”
On demand stimulation, all that the article talks about is equipment upgrades and replacing old consumer goods with new ones. This is likely to be insufficient. But clearly there is no fresh thinking that is taking place at the top. For instance, China FAW has launched a replacement subsidy of up to 50,000 yuan to encourage consumers to replace new cars, the report informs.
“With policy guidance, central and local coordination, and the response of businesses, the effects of policy are gradually emerging. In Q1, industrial investment increased by 13.4% year-on-year, automobile sales increased by 10.6% year-on-year, and home appliance consumption increased by 5.8% year-on-year…Jin Xiandong, director of the Policy Research Office of the National Development and Reform Commission, said that driven by policies to expand domestic demand and promote consumption, various regions and sectors are continuously innovating consumption scenarios and optimising the consumption environment, leading to an increase in positive factors supporting consumption growth.” 政策引导、央地联动、商家响应，政策效果逐步显现。一季度，工业投资同比增长13.4%，汽车销量同比增长10.6%，家电类商品消费同比增长5.8%，市场空间加快释放。国家发展改革委政策研究室主任金贤东表示，在扩大内需、促进消费政策带动下，各地方各领域不断创新消费场景、优化消费环境，支撑消费增长的积极因素在增多.
“On urban-rural development, the article promises to accelerate the urbanisation process of nearly 300 million rural migrant population, accelerate urban renewal, upgrade transportation and telecommunications infrastructure, and promote synchronous resonance between the new type of urbanization and comprehensive rural revitalization, ensuring that the integrated development of urban and rural areas will also release lasting momentum.” 促进近3亿农业转移人口加快市民化进程，加快城市更新、交通电信基础设施升级，推动新型城镇化和乡村全面振兴同频共振，城乡融合发展还将释放持久动能.
The final section talks about deepening reform and expanding opening up. In this regard, there is talk about supporting the private sector. The article says that steps have been taken to demonstrate support, such as:
Beijing offered awards instead of subsidies and loan interest discounts for enterprises engaged in scientific and technological research and basic innovation transformation; Guangzhou issued a regulation to support with difficulties in land acquisition and expensive financing. 北京探索采用以奖代补、贷款贴息等多种方式，支持民企进行原创性引领性科技攻关和基础创新转化；广州出台《广州市支持民营经济发展条例》，立法解决民营企业用地难、融资贵等问题……
In Q1, the added value of private industrial enterprises above designated size increased by 5.4% year-on-year; private investment increased by 0.5%, of which private investment in manufacturing increased by 11.9%; foreign trade by private enterprises denominated in RMB increased by 10.7%, 5.7 percentage points faster than the overall import and export growth rate. 一季度，规模以上私营工业企业增加值同比增长5.4%；民间投资增长0.5%，其中制造业民间投资增长11.9%；以人民币计价的民营企业进出口增长10.7%，比整体进出口增速快5.7个百分点.
Another example offered is the innovation with regard to lending, particularly for enterprises engaged in science and tech innovation. Instead of traditional assets, “Bank of Communications’ Shanghai Branch has incorporated factors such as the level of enterprise research and development, intellectual property rights, and science and technology innovation parks into credit assessment. This ‘Smart Intellectual Property Loan’ product was launched to solve the ‘urgent needs’ of enterprises.” 传统贷款产品重资产、重抵押，科创企业轻资产、重研发，资金一直是制约予君生物发展的瓶颈。交通银行上海分行因企施策，将企业研发水平、知识产权、科创园区等要素纳入征信考量，推出“智慧知产贷”产品，解了企业“燃眉之急”.
The article also mentions the special relending facility worth 500 billion yuan ($70.47 billion) to support sci-tech innovation, technical transformation and equipment renewal. The interest rate of the one-year facility stands at 1.75 percent. It can be extended twice, with a one-year term each.
Finally, the article talks about foreign investment and attracting foreign companies to take root in China. The first example offered is BASF. In terms of policy changes, the article mentions lifting restrictions on foreign investment in the manufacturing sector, pilot projects in the telecommunications sector, issuance of the 24 Foreign Investment Measures and holding of regular roundtable meetings for foreign-invested enterprises.
“In the first quarter, China’s foreign trade exceeded 10 trillion yuan for the first time, with the growth rate hit a new high in six quarters; exports to BRI partner countries were 2.68 trillion yuan, a year-on-year increase of 7%; a total of 4,541 China-Europe freight trains have been operated, delivering 493,000 TEUs of goods, a year-on-year increase of 9% and 10%, respectively, and the scale of import and export has reached a new level.” 一季度，我国进出口规模首破10万亿元，增速创6个季度以来新高；对共建“一带一路”国家出口2.68万亿元，同比增长7%；中欧班列累计开行4541列，发送货物49.3万标箱，同比分别增长9%、10%，进出口规模再上新台阶.
The article ends by informing that Goldman Sachs and Morgan Stanley have raised their expectations for China's economic growth this year. It also quotes the ADB’s recent report saying that China will account for 46% of growth in developing Asia in 2024-2025.
Page 2: There is a 钟才文 Zhong Caiwen commentary talking about the overcapacity issue. There are three broad arguments that the article makes:
“Under the conditions of an open market economy, countries have different international industrial divisions of labour due to their different comparative advantages. Through international trade, which facilitates the exchange of goods and services, countries collectively benefit from the specialisation and division of labour. This represents the inherent logic of economic globalisation and free trade. In the global market, output and demand are not limited to a certain country or region. Each country’s manufacturing industry produces for both the domestic market and the international market, and also meets its own diversified needs through the international market. For example, a report released by the American Semiconductor Association shows that the sales of chip companies headquartered in the United States will reach $275 billion in 2022, accounting for 48% of the global market; in China's $180.5 billion semiconductor market, US companies account for 53.4% of the market share. Likewise, Japan's Toyota Motor achieved global sales of 10.3095 million vehicles in fiscal year 2023, of which 8.7796 million were sold overseas, accounting for 85% of Toyota’s overall sales. This situation of production capacity exceeding a country’s domestic demand is not the so-called ‘overcapacity’, but a natural phenomenon of international division of labour and specialisation based on comparative advantages in economic globalisation. It is one of the manifestations of the role of market mechanisms.” 全球产能格局是经济全球化的结果。在开放的市场经济条件下，各国因比较优势不同，形成不同的国际产业分工，通过国际贸易互通有无，共同享有分工和专业化带来的收益，这就是经济全球化和自由贸易的内在逻辑。全球大市场中，产出和需求不是限定在某个国家或地区。每个国家的制造业都同时为国内市场和国际市场而生产，也通过国际市场满足自身多元化的需求。比如，美国半导体协会发布的报告显示，2022年总部在美国的芯片企业销售额达2750亿美元，占全球市场的48%；中国1805亿美元半导体市场中，美国公司的市场份额占53.4%。又如，日本丰田汽车2023财年实现全球销量1030.95万辆，其中877.96万辆在海外销售，海外销量占全球销量比重高达85%。这种产能超出一国国内市场需求的情况，并不是所谓“产能过剩”，而是经济全球化中根据比较优势进行国际分工和专业化的自然现象，是市场机制发挥作用的表现之一.
The next paragraph says that “under the conditions of a market economy, the law of value fundamentally determines the production and exchange of commodities, as well as the distribution pattern of production capacity. In market competition, production capacity with higher efficiency can obtain higher profits by offering lower prices, thereby eliminating production capacity with lower efficiency. In this process, the coexistence of efficient and inefficient production capacity at a particular phase does not indicate overcapacity but is rather a necessary stage for the law of value to take effect. For example, as technological progress and the concept of green development take root in the hearts of the people, new energy vehicles have begun to gradually replace traditional fuel vehicles. According to the ‘Global Electric Vehicle Outlook 2024’ report released by the International Energy Agency, global electric vehicle sales approached 14 million units in 2023, accounting for 18% of total sales. It is estimated that by 2030, one-third of vehicles on Chinese roads will be electric, while in the United States and the European Union, this proportion is expected to reach close to one-fifth. Data from China Automobile Dealers Association show that in the first half of April 2024, the retail penetration rate of new energy passenger vehicles in China was 50.39%, surpassing fuel vehicles for the first time. Judging from the development trend of global new energy vehicles, the gap between global supply and demand for new energy vehicles continues to expand, and high-efficiency production capacity is not in surplus but is rather insufficient. Therefore, which industries have overcapacity and what constitutes surplus capacity should be judged by the market and assessed on a global scale. Eliminating competition under the guise of ‘overcapacity’ is inconsistent with the basic spirit and rules of the market economy and the requirements of the law of value. This approach will inevitably lead to monopolies, inefficiencies, and stagnation, which are not conducive to the long-term development of any country.” 全球产能格局是价值规律作用的结果。在市场经济条件下，价值规律从根本上调节着商品的生产和交换，也决定着产能的分布格局。在市场竞争中，生产效率更高的产能可以更低的价格来获取更高的利润，从而淘汰生产效率低的产能。在这个过程中，高效产能与低效产能的阶段性并存并不是产能过剩，反而是价值规律发挥作用必经的过程。比如，随着技术进步和绿色发展理念深入人心，新能源汽车开始逐步替代燃油车。国际能源署发布的《2024年全球电动汽车展望》报告显示，2023年全球电动汽车销量接近1400万辆，占总销量的18%，预计到2030年，中国道路上行驶的汽车有1/3是电动汽车，美国和欧盟这一比例有望接近1/5。中国汽车流通协会汽车市场研究分会的数据显示，2024年4月上半月，中国新能源乘用车零售渗透率为50.39%，首次超过燃油车。从全球新能源汽车发展态势看，全球新能源汽车供需缺口不断扩大，高效产能不是过剩而是不足。因此，什么产业存在产能过剩，哪些产能是过剩产能，应交给市场去判断，放在全球下来衡量。以“过剩”的名义排除竞争，不符合市场经济的基本精神和规则，不符合价值规律的要求，必定导致垄断、低效和停滞，不利于任何一个国家的长远发展.
The final argument is that “the global production capacity pattern is the result of economic laws and technological innovation. Production capacity is the dynamic manufacturing capability that evolves continuously with the development of industrial organization and scientific technology. It is a continuous cyclical process of renewal from new to old, and then from old to new, in which economic laws and technological innovation play a decisive role. Regions with active innovation and rapid scientific and technological progress will have more forms of production capacity and faster production capacity updates. Competition, mergers and acquisitions, and elimination of backwardness among production capacities with different technological levels and technological routes are inevitable phenomena in this process. With the replacement of old and new production capacity, production capacity advantages shift/alternate between different countries and regions. Just as technological innovations and applications such as internal combustion engines, chassis production, and electronics have driven the iterative upgrading of the automobile industry over the past century, the ‘code’ for the rise of China's NEV sector is the overall innovation of energy drive systems, such as batteries and motors, under the guidance of green and low-carbon development. This innovation has also led to the convergence of high-quality new energy capacities from around the world to gather in China. In 2023, more than 50% of Tesla's total global deliveries were produced by its Shanghai Gigafactory. International manufacturers such as Bosch, Magna and BASF have increased their R&D investment in the Chinese market. The overall innovation and overall rise of China's new energy vehicle industry not only meets the needs of the Chinese market, but also contributes to filling the global supply and demand gap of new energy vehicles and achieving green development…It should be noted that the continuous emergence and accumulation of high-quality production capacity representing advanced productivity in a country is a manifestation of market vitality. China, as the world's largest manufacturing country and the largest exporter of goods, has witnessed the emergence of countless emerging industries and enterprises…The continuous emergence of new players, relying on technological innovation, demonstrates China’s economic vitality and creativity, rather than being indicative of overinvestment and overcapacity.” 全球产能格局是经济规律与科技创新作用的结果。产能是动态发展的制造业能力，随着产业组织和科学技术的发展而不断更新进步，是从新到旧、再从旧到新不断循环的过程，其中经济规律和科技创新起着决定性作用。创新活跃、科技进步快的地方，产能形态也就多、产能更新速度就更快，不同科技水平、科技路线的产能同台竞争、兼并重组、淘汰落后是这个过程中的必然现象。伴随新旧产能竞争更替，产能优势也在不同国家和地区之间交替。正如百年来内燃机、底盘生产、电子化等技术创新应用推动汽车产业迭代升级，中国新能源汽车崛起的“密码”是绿色低碳发展引领下，电池、电机等能源驱动系统的整体性创新。这一创新也带动全球新能源优质产能向中国集聚。2023年特斯拉全球交付总量中超过50%由上海超级工厂生产。博世、麦格纳、巴斯夫等国际厂商均加大在中国市场研发投入。中国新能源汽车行业整体性创新、整体性崛起既满足中国市场需求，也为弥补全球新能源汽车供需缺口、实现绿色发展作出贡献。德国汽车工业协会主席希尔德加德·穆勒认为，“中国电动汽车的发展以及中国市场的活力对全球汽车产业的发展是有益的”“对于实现全球气候目标而言，中国市场的成功经验至关重要”。要看到，代表先进生产力的优质产能在一国不断涌现集聚是市场活力的显现。中国作为全球制造业规模最大的国家和最大商品出口国，无数新兴的产业和企业不断涌现，长江后浪推前浪，不断上演依靠科技创新推陈出新、奋勇争先的市场大戏，这是中国经济活力和创造力的反映，而不是什么过度投资和产能过剩的表现.
The final paragraph is an interesting counterattack.
“In recent years, some countries have pursued ‘decoupling and breaking chains’ in the economic field for political purposes; they have also and implemented measures such as building ‘small yards and high walls’, ‘friendshoring’ and ‘capacity backup/replicating production capacity as backup’, resulting in a significant amount of redundant construction and global overcapacity. Such practices which run counter to economic globalisation, exclude competition, and violate the law of value of market economics have pushed up global production costs, reduced economic efficiency, and harmed the well-being of global consumers and the interests of enterprises in related fields. Only through free trade and full competition can the optimal solution for the global production capacity layout be formed. Many international companies have realised that the fiercely competitive and innovation-driven Chinese market is a ‘well-equipped gymnasium’ (“设备齐全”的“健身房”). Faced with the continuous growth and development of China's manufacturing industry, the correct and proactive attitude should be to compete openly and fairly with Chinese enterprises in the open market, seeking opportunities for cooperation and mutual progress, rather than hiding behind the walls of trade protectionism and nationalism, shooting cold arrows of ‘overcapacity’ (射出“产能过剩”的冷箭)/engaging in malicious and insidious attacks about overcapacity. Openness leads to progress, while being closed leads to backwardness. This is an important lesson drawn from China's history of the past two centuries, and it will be further tested by the history of the new century.” 市场驱动的全球产能格局调整将在波折中不断向前。近年来，一些国家出于政治目的，在经济领域“脱钩断链”，实施“小院高墙”“友岸外包”“产能备份”等措施，造成大量重复建设和全球性产能过剩。这种逆全球化、排除竞争、违背市场经济价值规律的行为，推高了全球生产成本，降低了经济效率，损害的是全球消费者福祉和相关领域企业利益。只有自由贸易、充分竞争，才能形成全球产能格局的最优解。很多国际企业已经正确认识到，竞争激烈、创新活跃的中国市场是一个“设备齐全”的“健身房”。面对中国制造业的不断发展壮大，正确的、积极的态度应该是在开放公平的市场上与中国企业光明正大地竞争，并寻求合作机会，共同进步，而不是躲在贸易保护主义和民族主义的高墙后，射出“产能过剩”的冷箭。开放带来进步，封闭导致落后。这是中国从过去两个世纪历史中得出的重要经验，也将得到新世纪历史的进一步检验.
Page 3: There’s a HuanYuPing commentary discussing the importance of adhering to the correct positioning and enhancing the stability of China-EU relations. The core argument is that:
“China’s development and progress brings opportunities for Europe, and the healthy and stable development of China-EU relations will help Europe cope with its own challenges. To enhance the stability of China-EU relations, both sides need to adhere to mutual respect, independence, and properly manage differences…China and Europe are the two major forces promoting multipolarity, the two major markets that support globalization, and the two major civilizations that advocate diversity. How China-EU relations develop has a bearing on the direction of the world. As the international situation becomes increasingly turbulent, only by adhering to the position of comprehensive strategic partnership, continuously strengthening dialogue and cooperation, and properly handling frictions and differences can China and the EU effectively maintain world peace and stability and promote human development and progress.” 中国的发展进步对欧洲意味着机遇，中欧关系健康稳定发展将为欧洲应对自身挑战提供助力。增强中欧关系的稳定性，需要双方坚持相互尊重、独立自主，妥善管控分歧习近平主席应邀对法国、塞尔维亚、匈牙利进行国事访问，是中国面向欧洲的一次重大外交行动。中欧是推动多极化的两大力量、支持全球化的两大市场、倡导多样性的两大文明，中欧关系如何发展攸关世界的走向。在国际形势动荡加剧的当下，中欧唯有坚持全面战略伙伴关系定位，不断加强对话合作，妥善处理摩擦分歧，才能有效维护世界和平稳定，促进人类发展进步.
The first section argues that:
“China and the EU have no fundamental conflicts of interest or geo-strategic contradictions. The common interests of both parties far outweigh their differences. The correct positioning of the relationship between the two sides is that of partners, with cooperation as the mainstream tone, independence/autonomy as the key value, and the development prospects being win-win…Facts have repeatedly shown that as long as China and the EU jointly grasp the general direction and main tone of the development of their relations, China-EU relations will continue to achieve development that is in line with the interests of both sides and the expectations of the people. At present, China and Europe are among each other's most important trading partners. In 2023, China-EU trade has overcome adverse circumstances, such as the global trade downturn, to reach $783 billion, and China-EU two-way investment stock exceeds $250 billion. China is willing to work with the EU to become a lasting partner in economic and trade cooperation, a priority partner in scientific and technological cooperation, and a trusted partner in industrial, supply and data chain cooperation. China and the EU can achieve mutual success and common prosperity…” 中欧没有根本利益冲突，也没有地缘战略矛盾，双方的共同利益远远大于分歧，双方关系的正确定位是伙伴，主流基调是合作，关键价值是自主，发展前景是共赢...事实一再表明，只要中欧双方共同把握好彼此关系发展大方向和主基调，中欧关系就能不断取得符合双方利益和人民期待的发展。当前，中欧互为最重要的贸易伙伴之一。2023年，中欧贸易克服全球贸易低迷等不利影响，总额仍高达7830亿美元，中欧双向投资存量超过2500亿美元。中方愿同欧方做经贸合作的持久伙伴、科技合作的优先伙伴、产供链数据链合作的可信伙伴，中欧完全可以实现相互成就、共同繁荣.
It adds that “China's development and progress means opportunities for Europe, and the healthy and stable development of China-EU relations will help Europe cope with its own challenges.” And then warns against de-risking.
The second section says that both sides need to think about the ways in which they can “enhance the stability of China-EU relations”. It says that Xi Jinping has said that “we should not treat each other as adversaries because of differences in systems, we should not reduce cooperation just because of competition, and we should not engage in confrontation just because of differences.” 习近平主席指出，双方要树立正确认知，增进理解互信，重信守义，一心一意发展关系，不能因为制度不同就视彼此为对手，不能因为出现竞争就减少合作，不能因为存在分歧就进行对抗.
The author adds that it is important to “adhere to mutual respect.” “The Chinese people are proud that they have found the correct development path that suits their national conditions. Both China and Europe should seek common ground while reserving differences, appreciate each other, learn from each other, and promote each other. Positioning China simultaneously as a partner, competitor, and systemic rival is neither factual nor feasible. It will only lead to disturbances and obstacles in China-EU relations.” 中国人民为自己找到的符合本国国情的正确发展道路感到自豪。中欧双方应该求同存异、相互欣赏、相互借鉴、相互促进。将中国同时定位为伙伴、竞争者、制度性对手，既不符合事实，也不可行，只会给中欧关系带来干扰和障碍.
Likewise, the author calls to maintain autonomy. “China-EU relations have an internal logic and are not targeted at, dependent on or controlled by any third party. The EU must adhere to strategic autonomy, form an objective and correct understanding of China, and find a rational starting point for formulating its China policy. Looking back at history, the Cold War pattern of opposing camps and group confrontation did not prevent China and Europe from engaging in contacts and establishing ties based on their own strategic interests. Today, as the world is becoming more multipolar, China and Europe should transcend Cold War mentality and ideological opposition, transcend the logic of systems confrontation, and oppose all forms of ‘new Cold War. Earlier this year, French President Macron quoted General de Gaulle as having said that ‘France should listen directly to China's voice and let China hear France's voice’. This demonstrated strategic clarity in handling relations with China independently. The European people also support Europe pursuing independent development of relations with China. A questionnaire survey conducted by the ECFR among 16,000 people in 11 EU countries showed that most of the respondents believed that Europe should maintain good economic and trade relations with China and should not choose sides on political issues.” 增强中欧关系的稳定性，需要坚持独立自主。中欧关系有着内在逻辑，不针对、不依附、不受制于第三方。欧方要坚持战略自主，形成客观正确的对华认知，为制定对华政策找到一个理性的出发点。回顾历史，阵营对立、集团对抗的冷战格局没有阻拦中欧双方从自身战略利益出发开展接触、建立联系。在世界多极化加速发展的今天，中欧更应超越冷战思维和意识形态对立，超越制度对抗，反对各种形式的“新冷战”。法国总统马克龙今年初援引戴高乐将军的话表示，“法国应该直接倾听中国的声音，也让中国听到法国的声音”，展示了独立自主处理对华关系的战略清醒。欧洲人民也支持欧洲独立自主发展对华关系。欧洲对外关系委员会对11个欧盟国家的1.6万人进行的问卷调查显示，多数受访者认为，欧洲应该与中国保持良好经贸关系，在政治问题上不应选边站队.
The commentary then talks about the importance of properly managing differences. It says that the two sides have differences in terms of history, culture, development level and ideology. “It is normal for the two sides to have different views on some issues. They should maintain communication and consultation in a constructive manner, respect each other's major concerns and core interests, especially ensure respect for sovereignty, security, and development interests, not interfere in each other's internal affairs, and jointly safeguard the political foundation of China-EU relations.” 增强中欧关系的稳定性，需要妥善管控分歧。中欧历史文化、发展水平、意识形态存在差异，双方在一些问题上看法不同很正常，应该以建设性态度保持沟通协商，尊重彼此重大关切和核心利益，特别是尊重主权、安全、发展利益，不干涉对方内政，共同维护中欧关系的政治基础.
On economic and trade issues, the article says that given the large scale, “some bumps and bruises are inevitable” 中欧经贸合作体量大，难免出现磕磕碰碰. “China is willing to strengthen communication and coordination with the EU, promote cooperation and resolve differences through dialogue, oppose the pan-politicization and pan-securitisation of economic, trade, and scientific and technological cooperation, jointly maintain the security and stability of industrial and supply chains, and create a favourable environment for cooperation.” 中方愿同欧方加强沟通协调，以对话促合作、解分歧，反对把经贸、科技合作泛政治化、泛安全化，共同维护产业链供应链安全稳定，为合作创造有利环境.
The final section talks about the global strategic situation, casting China and the EU as major players. “China and Europe take the lead in safeguarding the international system with the United Nations at the core, the international order based on international law, and the basic norms of international relations based on the purposes and principles of the UN Charter, jointly resist the revival of camp confrontation mentality and oppose unilateral hegemonism. This is of great significance for maintaining world peace and stability, promoting world multi-polarization and democratising international relations.” 当前形势下，中欧双方带头维护以联合国为核心的国际体系、以国际法为基础的国际秩序、以联合国宪章宗旨和原则为基础的国际关系基本准则，共同抵制阵营对抗思维复活、反对单边霸权主义，对于维护世界和平稳定、推动世界多极化和国际关系民主化具有重要意义.
It also lashes out at “artificially creating technological barriers and cutting off industrial and supply chains”, warning that it will lead to division and confrontation. “Both sides should remain vigilant against the fragmentation of the world economy and the tendency towards protectionism, continue to pursue an open policy, adhere to fair competition, uphold free trade, avoid pan-securitization, and resist anti-globalization tendencies. China welcomes the EU to participate in BRI and GDI, and is also willing to dock with the EU's ‘Global Gateway’ plan. They two sides should actively leverage their respective strengths, and work together to help developing countries accelerate their development.” 双方应对世界经济碎片化、保护主义倾向保持警惕，继续奉行开放政策，坚持公平竞争，维护自由贸易，避免泛安全化，抵制逆全球化。中方欢迎欧方参与共建“一带一路”、全球发展倡议，也愿对接欧盟“全球门户”计划，积极发挥各自所长，一道帮助发展中国家加快发展.
The only other report to note is around the visit of Zheng Jianbang to Gambia for the Organization of Islamic Cooperation meeting. As per China Daily, “the message and visit show the strategic importance Beijing attaches to relations with the OIC, and Islamic countries as a whole.” The PD report talks about China-Gambia ties. It is very generic. But do note Gambia’s reference to the one-China principle. At the sidelines of this meeting, Zheng also spoke to Pakistan Foreign Minister Ishaq Dar.
Page 16: There’s a reference to a new report on Chinese-style modernisation. If you are interested, Xinhua has the full English report. There’s nothing new in this, if you have been reading the newsletter regularly. But it’s useful to have there in one set.